The threat of a strike among the 146,000 United Auto Workers at the so-called Big Three automakers of Ford, General Motors and Stellantis puts at risk half a billion dollars per day in an economy that generates more than $26.7 trillion in goods and services each year, or more than $73 billion per day.
Our estimate indicates that the economy would suffer a modest 0.2% drag this quarter should the action last for a month.
While that amount is large in nominal dollar terms, it would not be large enough to tip the economy into recession. In the end, the impact of a such a strike would be modest compared to previous generations.
This is because of the major changes in the size of the U.S. private sector labor force, the growing economic importance of the service sector, the rise of the technology industry and the financialization of the broader American economy.
Our back-of-the-envelope estimate indicates that the economy would suffer a modest 0.2% drag during the current quarter should the action last for a month.
To better understand why, consider the number of workers that belong to a union.
American labor unions have been declining for half a century, with only 6% of private sector workers now affiliated with one. For example, the major labor action of 1945-46 involved 320,000 autoworkers at a time when the U.S. labor force had approximately 40 million to 43 million workers in contrast with 166 million today.
Today, even a potential action involving 146,000 workers is not enough to move the needle in a major fashion given the structural changes that have taken place in the economy.
Read more of RSM’s insights on manufacturing and the middle market.
To be sure, the spillover from what would be the largest labor action inside the auto sector since 1945-46 would be felt broader manufacturing ecosystem that supports domestic auto production. This includes industries like of petrochemicals, steel and glass, and a complex set of suppliers that produce component parts, electronics and software.
There are more than 70 major industrial ecosystems that would be affected by any significant labor action. Such a threat should provide the impetus for an equitable solution between both labor and the auto producers.
Our RSM US Supply Chain index has a reading of minus-0.47, which implies that supply chain stress currently exerts a drag on overall economic activity.
A large labor action would add to this strain. Given the fact that domestic supply chains and the broader economy have not yet fully recovered from pandemic-era shocks, the duration and intensity of any labor action would push the full healing of both further into the future.